Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday November 30.
Things to Watch in the Week Ahead: General Motors (GM), Ford (F), Toll Brothers (TOL), Brown-Forman (BF.A), Ascena (ASNA), Starbucks (SBUX), Yum Foods (YUM), Lululemon (LULU). Other stocks mentioned: Teavana (TEA)
General Motors (GM) and Ford (F) report on auto sales: The misfortune of hurricane Sandy has forced people to replace their cars. Cramer expects strong numbers.
Toll Brothers (TOL) reports. This is the best homebuilder in the country, and management is likely to tell a strong story, given the comeback of the housing sector. Cramer would buy TOL on a decline.
Brown-Forman (BF.A) was downgraded by Goldman Sachs to a “Sell.” Cramer thinks GS was wrong in its last downgrade and is wrong again.
Ascena (ASNA) is worth buying ahead of its earnings, because of some merger gains, but Cramer would only buy it on a decline.
Starbucks (SBUX) analyst day. Cramer thinks SBUX is “smoking,” and the Teavana (TEA) acquisition will represent a revolution in tea, the way Starbucks revolutionized coffee consumption.
Yum’s (YUM) analyst day. This company has some explaining to do following an earnings shortfall.
Lululemon (LULU) reports. This is a wild stock, and Cramer thinks it tends to be a buy when it “blows up.” Short-sellers tend to make LULU look worse than it is, and Cramer advised investors to buy it only when he gives the “green light.”
Non-Farm Payroll Report is usually an important number but “Sandy has made the month of November virtually irrelevant,” concerning employment data. It is worth dismissing unless the unemployment rate has “shockingly dropped.”
CEO Interview: Bill McDermott, SAP (SAP). Other stocks mentioned: Bank of America (BAC), Caterpillar (CAT), Ebay (EBAY)
SAP (SAP) is a tech company that has embraced the future and has been rewarded. The company makes software for enterprise, and is levered to applications for mobile, cloud and big data. These are the strongest themes in tech, and SAP dominates them. The company reports a strong quarter and is half a point off its high. The stock has risen 51% since Cramer got behind it in 2011. CEO Bill McDermott discussed SAP’s best third quarter of its history. “We are determined to double the addressable market,” said McDermott.
With mobile growing aggressively and data doubling every 18 months, SAP will continue to provide solutions for companies on how best to manage data and increase efficiency. Bank of America (BAC) has reduced long hours analyzing data with SAP’s software; “This saves BAC a fortune,” said McDermott. Caterpillar (CAT) uses SAP’s technology to analyze ways to increase efficiency for farm equipment, and SAP has helped the NFL “improve the fan experience.”
SAP’s acquisition of Ariba, “the Ebay (EBAY) of enterprise,” dramatically increases SAP’s addressable market. SAP is even able to benefit from the European slowdown, because companies on the Continent are forced to find solutions that will enable them to streamline and cut costs.
What the Heck? Office Max (OMX). Other stocks mentioned: Staples (SPLS), Office Depot (ODP)
Cramer devoted a “What the Heck” segment to discuss the unaccountable rise of Office Max (OMX), the smallest player in the office supply space; it has run 122% for the year, while its peers are declining. There doesn’t seem to be a reason, on the surface, for this dramatic rise. Retailers are hurt by fiscal cliff worries, small businesses are not opening or are closing, demand has shifted from paper supplies to digital products. Five months ago, the stock was “left for dead,” and has since seen a monster run. Office Depot (ODP) is up 56% for the year, but has seen less than half the gain of OMX, while Staples (SPLS) has declined 16% for the year. Why is OMX performing so well?
First of all, expectations for OMX were incredibly low. The stock fell from $17 to $4 last year. When it reported some in-line quarters, the stock rose. In addition, OMX for years was smarting from the Lehman Brothers' debacle; OMX had bonds backed by Lehman, and there was a resolution last September that reduced OMX’s debt. OMX owns 20% of Boise Cascade, and two weeks ago, it was announced the company would go public. This represents an unlocking of hidden value for OMX. In addition, there is chatter about a merger between OMX and Office Depot. While a similar merger between Office Depot and Staples was struck down by the Justice Department in the 90s, the issues are different for the current proposed merger, thanks to the growth of ecommerce. Another possible reason for OMX’s rally is that it reduced its footprint early when it saw that competitors were having to close stores. Since OMX has a lower number of stores than its peers, it has less to lose from these closures.
Cramer would not buy OMX at its current levels, but on closer inspection, it has a better story than most investors thought. Cramer might consider buying OMX if it drops a few points.
Mad Mail: InContact (SAAS), Textainer (TGH), Celldex (CLDX), Hillenbrand (HI), Regeneron (REGN) Other stocks mentioned: Salesforce.com (CRM)
) has a great business model, but Cramer thinks it is too early to buy the stock. It doesn’t yet turn a profit. He prefers Salesforce.com (CRM
Textainer Group (TGH
) is the largest leaser of marine cargo containers in the world. However, Cramer would not buy it because of heavy customer concentration in a few large shippers and the decline in gobal trade.
Celldex Therapeutics (CLDX) has a line of treatment for brain and breast cancers and a rich pipeline to support its valuation. Cramer would wait until December 8th to see the data on its breast cancer treatment. Currently, the stock has run too much to buy, but he would consider it on a pullback.
Hillenbrand (HI) is the largest producer of burial caskets, and has had a big move after a strong quarter and an acquisition. Cramer likes the 3.6% yield, but would wait for a pullback.
Regeneron (REGN) has a good drug for macular degeneration, and has very few safety concerns. Cramer thinks it is a buy.
What Does Yum’s Decline Say About China? Other stocks mentioned: Nike (NKE), Coach (COH), McDonald's (MCD)
Yum’s disappointing quarter says more about the state of the fast food industry, especially combined with McDonald’s (MCD) recent lackluster performance, than about a possible slowdown in China. Cramer thinks the Chinese economy is revving up, especially with a stimulus and increased industrial growth. Companies levered to China are reporting mixed results: Nike (NKE) had a run in the U.S, but is seeing a decline in sales in China, while Coach management (COH) said business in China was good, but the U.S. was slow for sales of its products. Expansion into China will be good for Starbucks. Perhaps the demand for fried chicken is cooling in China, but growth is still strong. However, Cramer still thinks Yum is a hold and believes it is headed for better times. Those who want to get out of Yum should do so after its analyst day on Thursday, if it rises.
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